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Duluth's Cirrus to be acquired by Chinese company

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A Cirrus plane
Cirrus Design's SR-22 in a file photo. Cirrus has agreed to be acquired by a Chinese company, China Aviation Industry General Aircraft Co., Ltd.
MPR file Photo/Bob Kelleher

Duluth-based Cirrus Aircraft has reached a deal to sell the company to China Aviation Industry General Aircraft Company, based in China's Guangdong Province.  A price was not disclosed.  

The sale brings new resources into the company to help development of a new jet aircraft and accelerate the company's global expansion, Cirrus CEO Brent Wouters said.

Wouters said the sale and incoming cash will expedite product development. Cirrus has been working on a seven seat personal jet, the Vision SF50, a project delayed by several lean years in airplane sales.  

Current and new jobs  will stay in the company's current locations of Duluth and Grand Forks, North Dakota. Wouters said the deal will accelerate Cirrus' international expansion.

"We're in about 60 countries today," he said. "We think this will help open the Chinese market, where we've made lots of investments and help them develop the general aviation foundation to make it successful. But it will also help us in a lot of our effort around a lot of other countries around the world, and so that's what has us excited today."

Wouters said there won't be any turnover among top executives either including company co-founder Dale Klapmeier.

"The current management team is staying," he said. "Dale is absolutely staying. We're all very excited about it and Dale is excited about returning to growth."

The sale comes after several challenging years for Cirrus Aircraft and the General Aviation manufacturing industry. Cirrus sales and employment crashed in late 2008, with total employment dropping from over 1,300 to just shy of 500 today. 

At one point, Cirrus was behind on rent payments to the City of Grand Forks and to Duluth's Economic Development Authority. Rumors circulated that Cirrus was having trouble repaying customers who wanted their down-payments on a jet refunded. 

Wouters said the business climate has greatly improved, with Cirrus selling 264 new airplanes last year.

Cirrus was founded in Wisconsin in 1984 by brothers Alan and Dale Klapmeier, who moved the company to Duluth in 1994. Alan Klapmeier left the company in 2009, after being replaced as CEO the year before.   

This isn't the first big ownership change for Cirrus. Crescent Capital, owned by Bahrain-based Arcapita Bank, purchased a 58-percent share of Cirrus in 2001.

In northeast Minnesota, the sale was greeted with optimism. Duluth Mayor Don Ness said he appreciates the assurances Cirrus management offered that the operations will remain in Duluth, which is his primary concern.   

U.S. Rep. Chip Cravaack said he will meet with representatives from Cirrus and the Executive Director of the U.S.-China Economic and Security Review Commission later this week to discuss the employment and security implications of the offer.  Cravaack said his first priority is to make sure those jobs stay in Minnesota.

Richard Aboulafia, an aerospace consultant with the Teal Group, said the sale could raise some suspicions about China's motives. China has been hungry for turbofan jet technology, and the manufacturer of the Cirrus jet engine also makes a turbofan engine for cruise missiles.  

But Aboulafia said the Chinese won't receive that technology.

"They're buying the capability to build a very small plane," he said. "They're not buying the jet engine technology that's made by somebody else altogether."

According to a government report, China has put a priority on developing its aviation industry, including general aviation. In Cirrus, Aboulafia said, the Chinese are buying a good airplane company. In return, Cirrus receives access to the huge Chinese market.

"I think there's a couple of areas here that might raise an eyebrow or two before they're fully thought through, but at the end of the day this is probably a simple business deal designed to gain access to technology that's relevant to the Chinese general aviation market," Aboulafia said.

But it remains to be seen what happens with the Cirrus jobs in the United States. As China gains aircraft manufacturing capability in its own aviation industry, it could siphon jobs from Duluth.